WinFS is a lot like the song "The Itsy-Bitsy Spider". The rain has come down several times during WinFS' development cycle and washed the spider out. Over time, the sun would come out, dry out all the rain (find a new home and application for WinFS), and then the spider would start its climb again.
WinFS was intended to offer a very rich storage technology and has grown to a broader sort of data management platform. Because of all of its storage innovations, it's a very complex and far-reaching technology. The news has just come out that WinFS is now morphing into a component of Katmai, the codename for the next release of SQL Server.
You can read all about it at http://blogs.msdn.com/winfs/archive/2006/06/23/644706.aspx.
So what's your opinion? Is WinFS dead or merely transformed into something new? Provide a comment here or email me at email@example.com.